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Time and money · 5.4

Write-offs and what they are telling you

Write-offs and what they are telling you. What decides it, what it costs, and what usually goes wrong. For another implementation reference, see this Monitask guide.

A write-off is a diagnosis, not an embarrassmentThe reframe

Hours recorded and not billed. Most organisations treat the number as a performance failure and record no reason, which destroys the only useful thing about it.

With a reason attached, the write-off log is the clearest account of what is wrong with your commercial arrangements that any business will produce. For additional context, Workforce.com is a useful reference.

Five reasons, each pointing somewhere different

The estimate was wrong. A pricing and estimating problem. Frequent on a particular kind of work means the estimating model needs correcting, not the people.

Scope grew without agreement. A contracting and communication problem, and the most expensive of the five.

Rework. Something delivered and redone. Points at briefing, review or capability.

Learning. Somebody new to the work. Legitimate, expected, and worth separating so it does not contaminate the others.

Goodwill. A deliberate commercial decision. Fine, and it should be a decision by somebody authorised rather than an accumulation.

Who authorises one

Above a threshold, somebody other than the person whose work is being written off. Not from suspicion: because a person under pressure to keep a client happy will absorb hours quietly, and the signal disappears with them.

Below the threshold, anybody, with a reason recorded. The reason is the point.

Reading the log quarterly

By reason, by client and by service line. Three views, ten minutes.

What it typically shows: one client absorbing a disproportionate share, one kind of work consistently underestimated, and a seasonal pattern nobody had noticed. Each is actionable and none is visible from the total.

The write-off nobody records

Hours never entered at all, because somebody knew they could not be billed. This is the largest category in most professional businesses and it is invisible by construction.

The only way to see it is to make recording unbillable time normal and unpunished, which returns to the adoption argument: a system where an unbillable hour attracts a question is a system that will not be told about unbillable hours.

Targets on write-offs

Everything in the entry on measurement applies. A write-off target produces fewer recorded write-offs, achieved by not recording the hours in the first place, and the business loses visibility of the problem while believing it improved.

What good looks like

A write-off rate that is stable and explained, with a reason against every entry, reviewed quarterly, and no target attached. The number itself matters less than whether anybody can say what it consists of.

Where to put the reason

On the write-off itself, from a short fixed list matching the five above, plus a free-text line. A fixed list is what makes the quarterly analysis possible; free text alone produces a hundred unique explanations and no pattern.

Distinguishing a write-off from a discount

A discount is agreed with the client in advance. A write-off is a decision you take alone about work already done. They look identical on an invoice and they mean opposite things about the relationship.

Record them separately or the analysis mixes a pricing decision with a delivery problem.

Write-ups

Billing more than the recorded hours, where the contract allows it. Rarer, worth tracking with the same discipline, and a signal that value-based pricing might suit that work better than hourly.

The conversation with the team

Share the write-off analysis with the people whose hours are in it, by reason and at aggregate level. A team that never sees it concludes it is a judgement about them; a team that sees the pattern usually identifies the cause faster than management does.

The number to report upward

Write-offs as a proportion of recorded hours, by reason, as a trend. Not as a target, for the reasons above, and not as a single figure, because the composition is the information.

A short summary

Record a reason from a fixed list against every write-off. Authorise above a threshold. Review quarterly by reason, client and service line. Keep discounts separate. Never set a target. And make recording unbillable time safe, because the largest category is the one never entered.

Setting the threshold

Low enough that meaningful amounts get a second pair of eyes, high enough that routine adjustments do not queue for approval. In most professional businesses that is a few hours rather than a few minutes.

Review the threshold annually against the distribution of write-offs, because a threshold set once tends to sit above almost everything within a few years.

One line to carry

A write-off without a recorded reason is a number. With one, it is the clearest account of your commercial problems that you will ever produce.

Where to start

Add the reason field with five options this month. Within a quarter you will know more about your commercial arrangements than any report currently tells you.

The seasonal pattern

Write-offs cluster: at year end, around holidays, and in the weeks after a large delivery. Knowing the shape stops each occurrence being treated as a new problem and allows the cause to be addressed once.

The write-off that should have been a conversation

Work absorbed silently because raising it felt harder than eating it. Common in relationships where somebody senior at the client is difficult, and it is a cost the business pays without ever deciding to.

Where the reason field shows repeated goodwill against one account, the actual finding is that somebody has been avoiding a conversation, and they usually need support rather than instruction to have it.

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